Fraud Case Analysis: Enron Corporation

FRAUD CASE ANALYSIS: ENRON CORPORATION

Enron company was formed in 1985 at that time it was seventh largest company of America (U.S) which deal in natural gas. it has approximately 20,000 employees. Within passage of time its capacity of generating profit increasing. In 1994 the corporation made its first electricity trade which would turn into one of Enron’s biggest profit centers in the next years. Its annual revenues rose from about $9 billion in 1995 to over $100 billion in 2000. At the end of 2001 it was revealed that its reported financial condition was sustained substantially by institutionalized, systematic, and creatively planned accounting fraud. According to Thomas (2002), the drop of Enron 's stock price from $90 per share in mid-2000

First of all company used “mark to market” technique in order to earn high profit and increase its stock price. Actually, this technique is used by brokerage and trading companies. This method requires that once a long-term contract was signed, the amount of which the asset theoretically will sell on the future market is reported on the current financial statement .According to this concept company showed its estimated income as current income. In this way its stock prices also increases but this is not actually happened. It was just wrong technique which shows over balances of

some highlights when this scandal’s head exposed 30million dollar of self dealing by chief financial officer, 700 million dollar of net earning disappeared ,1.2 billion dollar shareholder equity disappeared. After a long process Andrew Fastow the president Enron finance executive has been sentenced to six years in jail. Fastow ashamed of fraud and money laundering in 2004 and also became the chief whiteness in the trial against Jeffrey Skilling and Ken Lay. His evidence helped to prove Lay (who attack) and Skilling, who was sentenced to 24 years in jail. In May 2006, the latter was found guilty on 19 counts of conspiracy, fraud and inside trading over Enron scandal. Skilling was found to have orchestrated a series of deals and financial scheme which later lead to loses as they hide debts from investors. Michael Kopper, former executive at Enron, was sentenced to 37 months in jail. Kopper pleaded guilty in 2002 to wire fraud and money